The Indonesian government enacted Law Number 11 of 2020 on Job Creation (“Omnibus Law”) with the main objective of encouraging investments, accelerating economic transformation, synchronizing policies between the central and regional governments, making doing business easier, and remedying overlapping regulations. The Omnibus Law has amended several articles of Law Number 13 of 2003 on Manpower (“Law 13/2003”).
To follow up on the Omnibus Law, the government issued Government Regulation Number 35 of 2021 on Fixed-Term Employment Agreements, Outsourcing, Work and Rest Times and Terminations of Employment (“GR35/2021”).
One of the amendments made by the Omnibus Law is to the procedure for terminating employment. Under Law 13/2003 as amended by the Omnibus Law, the employer and the employee must try to avoid the termination of their employment relationship and it should only be conducted if termination has become unavoidable.
The Omnibus Law expressly introduces a new requirement for terminations of employment. Under amended Law 13/2003, if a termination of employment is no longer avoidable, the employer can initiate the procedure by serving the employee a notice of termination providing the purpose of and reason for his/her termination. The reason must be one of those acceptable under Law 13/2003 and GR35/2021. The notice must be delivered in writing to the employee at least 14 working days before the date of his/her termination.
Given the above, the procedure for terminating employment is now the following:
- The employer serves the employee a notice of termination stating the purpose of and reason for the termination at least 14 working days before the date of termination (or at least seven working days before if the employee is still on probation).
- If upon receiving the notice, if the employee accepts his/her termination, the employer must submit a report to the Ministry of Manpower or the local provincial/regency/municipal government office in charge of government affairs regarding manpower;
- However, if the employee refuses to accept the termination of his/her employment, the employee must deliver a rejection letter to the employer stating the reason, within seven working days of receiving the notice of termination.
- Thereupon, the employer and the employee must try to settle the dispute over the termination of employment through bipartite negotiations. The bipartite negotiations should be concluded within 30 working days of the commencement of the negotiations.
- If the employer and the employee reach a consensus during the bipartite negotiations, they must draw up a mutual termination agreement (MTA) that must be registered with the Industrial Relations Court (IRC). However, no consensus can be reached during the bipartite negotiations, the dispute over the termination of employment must be settled through the following procedure for the settlement of the industrial relations disputes under the prevailing regulations.
- a. If the employer and the employee cannot reach a consensus, they should register the dispute with the local government office in charge of manpower affairs (Manpower Office). Having received the application for the registration of the dispute, the Manpower Office will ask the parties if they would prefer to settle the dispute through arbitration or conciliation. In practice, the Manpower Office usually offers mediation, and the parties usually opt for mediation. If the parties do not inform the Manpower Office of their decision within seven working days, the Manpower Office will assign the dispute to a mediator.
b. The mediator must review the case and initiate the mediation within seven working days of the dispute being assigned to him/her.
c. If no consensus is reached through mediation, the mediator must issue a written recommendation within 10 working days of the first mediation session to the parties and the parties must submit a written answer within 10 working days of receipt of the written recommendation, stating whether they accept or reject the recommendation. If either party does not submit its answer, it will be deemed to have rejected the written recommendation.
d. If the parties accept the written recommendation, within three working days of the recommendation being accepted, the mediator must help the parties to draw up an MTA, which must be registered with the IRC.
e. The mediator must complete his/her duties within 30 working days of the dispute being assigned to him/her.
f. Conciliation is similar to mediation. The difference is that a mediator is an employees of the local Manpower Office, while a conciliator is chosen by the parties from the list of conciliators at the local Manpower Office.
- If either party rejects the mediator’s written recommendation, it may submit the dispute to the IRC in the District Court with jurisdiction over the employee’s domicile. The IRC is the court of first instance with jurisdiction over disputes over terminations of employment, and the applicable procedural law is the civil procedural law applicable in the general courts, unless stated otherwise in Law No.2 of 2004 on Industrial Relations Dispute Settlement. The panel of judges in the IRC must issue its ruling within 50 working days of the first hearing and the ruling must be provided to the parties.
- If either party does not accept the IRC’s ruling, it can submit an appeal to the Supreme Court. An IRC ruling becomes final and binding if no appeal is submitted within 14 working days after the ruling is read out by the panel of judges to those present in the hearing or after the date on which the ruling is received by a party who was absent in the hearing.
It should be noted that disputes over terminations of employment must still be settled according to Law Number 2 of 2004 on the Settlement of Industrial Relations Disputes as it has not been amended by the Omnibus Law.
This article is intended as a brief and general description of the procedure for terminating employment in Indonesia under the prevailing regulations and may not be used as a legal advice or to replace a legal advice on a specific case. The regulations referred to in this article may no longer be current. We will be pleased to assist by providing legal advice on matters related to this article, including by providing legal services and assistance for other legal issues. For more information, please contact us at firstname.lastname@example.org.